Converge Technology Solutions Corp.€¦ · Converge’sactual financial position and results of operations may differ materially from management’scurrent expectations and, as a

Converge Technology Solutions Corp. Leading North American Hybrid IT Solutions Provider

May 2020

Confidential and Proprietary Copyright © 2020 Converge Technology Partners

Disclaimer

IMPORTANT: YOU MUST READ THE FOLLOWING BEFORE CONTINUING

* The information contained in this document has been prepared by Converge Technology Solutions (“Converge” or the “Company”) and contains confidential information pertaining to the business, operations and assets of the Company. The information contained in this document (a) isprovided as at the date hereof and is subject to change without notice, (b) does not purport to contain all the information that may be necessary or desirable fully and accurately to evaluate an investment in the Company and (c) is not to be considered as a recommendation by the Companythat any person make an investment in the Company. The printed document may be incomplete without reference to the oral presentation or other written materials provided by the Company that may supplement this document. To the extent projections and financial analysis arecontained herein, they may be based on estimated financial performance prepared by, or in consultation with, management and are intended only to suggest a reasonable range of results. The Company has no obligation, whether express or implied, to update any or all of the informationor analysis contained herein or to advise the recipient of any changes. The information provided in this document is for discussion purposes only.An investment in the securities described herein is speculative and involves a number of risks that should be considered by a prospectiveinvestor. Prospective investors should carefully consider the risk factors described under “Risk Factors” in the appendix before investing in the Company and purchasing the securities described herein. Paradigm Securities Inc. (“Paradigm”) and its subsidiaries and affiliates, and any of itsshareholders, directors, officers, agents, consultants, advisors or employees do not make any representation or warranty, express or implied, as to the accuracy, completeness or thoroughness of the information contained in this document. Paradigm does not have any responsibilitywhatsoever in respect of the accuracy or completeness of, or omissions from, this document or any other document or information, written or oral, supplied at any time to any recipient of this document or its respective subsidiaries, affiliates, agents or advisors in the course of its evaluationof Converge or in respect of any opinions, projections or other forward-looking statements expressed therein or omitted therefrom. Paradigm expressly disclaims any liability resulting from the use of the information contained herein or otherwise supplied or resulting from the failure tosupply additional information. Paradigm has not independently verified any of the information contained herein and have not made an independent appraisal of the Company.

This document is confidential and is being provided to you solely for your information and may not be reproduced, in whole or in part, in any form or forwarded or further distributed to any other person. Any forwarding, distribution or reproduction of this document in whole or in part isunauthorized. By accepting and reviewing this document, you acknowledge and agree (i) to maintain the confidentiality of this document and the information contained herein, (ii) to protect such information in the same manner you protect your own confidential information, which shall beat least a reasonable standard of care and (iii) to not utilize any of the information contained herein except to assist with your evaluation of a potential investment in the Company.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION: This document includes information, statements, beliefs and opinions which are forward-looking, and which reflect current estimates, expectations and projections about future events. Statements containing the words“believe”, “expect”, “intend”, “should”, “seek”, “anticipate”, “will”, “positioned”, “project”, “risk”, “plan”, “may”, “estimate” or, in each case, their negative and words of similar meaning are intended to identify forward-looking statements. By their nature, forward-looking statements involve anumber of known and unknown risks, uncertainties and assumptions concerning, among other things, the Company’s anticipated business strategies, anticipated trends in the Company’s business and anticipated market share, that could cause actual results or events to differ materiallyfrom those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. In addition, even if the outcome and financial effects of the plans and eventsdescribed herein are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. Although Converge has attempted to identify important risks and factors that couldcause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors and risks that cause actions, events or results not to be as anticipated, estimated or intended. Forward-looking information contained in thispresentation is based on the Company’s current estimates, expectations and projections, which the Company believes are reasonable as of the current date. The Company can give no assurance that these estimates, expectations and projections will prove to have been correct. You shouldnot place undue reliance on forward-looking statements, which are based on the information available as of the date of this document. Forward-looking statements contained in this document are made of the date of this presentation and, expect as require by applicable law, the Companyassumes no obligation to update or revise them to reflect new events or circumstances.

Historical statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. In this regard, certain financial information contained herein has been extracted from, or based upon,information available in the public domain and/or provided by the Company. In particular historical results should not be taken as a representation that such trends will be replicated in the future. No statement in this document is intended to be nor may be construed as a profit forecast.

CAUTIONARY NOTE REGARDING FUTURE-ORIENTED FINANCIAL INFORMATION: To the extent any forward-looking information in this Presentation constitutes “future-oriented financial information” or “financial outlooks” within the meaning of applicable Canadian securities laws, suchinformation is being provided to demonstrate the anticipated market penetration and the reader is cautioned that this information may not be appropriate for any other purpose and the reader should not place undue reliance on such future-oriented financial information and financialoutlooks. Future-oriented financial information and financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to the risks set out above under the heading “Cautionary Note Regarding Forward-Looking Information”.Converge’s actual financial position and results of operations may differ materially from management’s current expectations and, as a result, Converge’s revenue and expenses may differ materially from the revenue and expenses profiles provided in this Presentation. Such information ispresented for illustrative purposes only and may not be an indication of Converge’s actual financial position or results of operations.

USE OF NON-GAAP MEASURES: This document refers to EBITDA because certain investors may use this information to assess the Company’ performance and also determine the Company’s ability to generate cash flow. This data is furnished to provide additional information and are non-GAAP measures and do not have any standardized meaning prescribed by GAAP. They should not be considered in isolation as a substitute for measures of performance prepared in accordance with GAAP and is not necessarily indicative of operating costs presented under GAAP.

This document may have been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission. You are responsible for protecting against viruses and other destructive items. Yourreceipt of this electronic transmission is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. As a consequence of the above, neither the Company nor any director, officer, employee or agent of any ofthem or any affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the document distributed to you in electronic format and the hard copy version that may be made available to you.

All figures in this document are in C$ unless otherwise stated.


Company Overview

• Converge Technology Solutions is building a leading national platform of regionally focused Hybrid IT Solution Providers (ITSP) in the U.S. and Canada focused on delivering industry leading solutions and services to public and private clients

• First acquisition completed in October 2017

• Focused on “roll-up” of IT Solution Providers

• Twelve acquisitions to date:

• Corus360, Northern Micro, Key Information Systems, Becker-Carroll, BlueChipTek, Essex Technology Group, Lighthouse Computer Services, SIS, Nordisk, Datatrend, VSS, and PCD Solutions

• Management team, board, and founders have extensive acquisition and management experience in both private and public markets

• Trading began on Nov 13, 2018 on the TSX Venture Exchange as TSXV:CTS

About Us

3


Hybrid IT Roll-Up Strategy

4

Technical Expertise and Experience Across Numerous Vendor Platforms

Full Suite of IT Solutions and Services

CloudCyber

SecurityAdvanced Analytics

Managed Services

DigitalInfrastructure

Complete Cloud Transformation Services

Plan and Design

Run and Operate

OptimizeBuild and Migrate

Hardware Partners Cloud Partners Distribution Partners

Portfolio Roll-Up

2,000+Customers

250+Total Vendor Relationships

400+Certifications

8Key Vendor

Relationships

Software Partners

190+Salespeople

40+Office

Locations

260+Technical Resources

with


Converge National Platform

5

190+Salespeople

40+Office

Locations

260+Technical Resources

2,000+Customers

250+Total Vendor Relationships

400+Certifications

Partner of the Year

(2018)

Rising Star of the Year

(2018)

Partner of the Year

(2018)

US Service Partner Ready

Recognition

(2018)

Veeam Partner of the Year

(2017)

Personal Systems Partner

of the Year

(2016)

Cloud

Hybrid/Private/Public

App Dev / DevSecOps

App Modernization

Cybersecurity

Data Protection

Detection and Response

Security Intelligence

Talent Solutions

Staffing

Recruiting

with

Scaled North America Footprint… …With Best of Breed Solutions & Capabilities

8Key Vendor

Relationships Advanced Analytics

Business Analytics

Artificial Intelligence

Data Management

Digital Transformation

Blockchain

Software Asset Management

Discovery

Digital Infrastructure

Data Center

End User Compute

Collaboration

Networking

Rising Star Partner of the

Year

(2019)

Business Unit Excellence

Award

(2020)


Converge Solution Practices

Advanced Analytics

Business Analytics

Data Management

Artificial intelligence

Application Development

Cloud Services

Automation

Hybrid / Public / Private

App Dev / DevSecOps

App Modernization

Cybersecurity

Data Protection

Security Intelligence

Detection

Response

Managed Services

Business Continuity

Disaster Recovery

Hosting

Talent Solutions - Staffing and Recruiting

Digital Infrastructure Data Center

Collaboration

End User Compute

Networking

6


Transformation into a Hybrid IT Solution Provider

Hybrid IT Solutions Provider (Hardware, Services, Software)

Traditional VAR Organization

Organization

Data Center

Higher Recurring Revenue for Converge

7

Converge acquires traditional VARs and transforms them into multi-cloud providers with sizable software and service capabilities


Differentiating Converge as a Hybrid ITSP

8

1. CY2019A

1

23.5% Gross Margins 30 – 39% Gross Margins 16 – 19% Gross Margins 13 – 16% Gross Margins 5 – 13% Gross Margins


Acquisitions & Key Milestones to Date

(Acquired Nov 2017)

(Acquired Feb 2018)

Sept 2017

Closed debenture financing of

~$4.0M

End of CY2017

C$293M in annualized

revenue

Feb 2018

Completed ‘pre-public’ private financing

of $4.3M

Q1 2018

Strengthened Management &

Executive Team

Aug 2018

Entered into acquisition agreement with Norwick Capital

Twelve acquisitions completed since October 2017

(Transaction Nov 2018)

(Acquired Dec 2018)

Oct 2018

Received C$5.25M convertible debenture

investment from a strategic investor

Nov 2018

Began trading on the TSX Venture

Exchange as TSXV: CTS

Sep 2018

Raised C$5.5M in a private placement

round

Q4 2018

9

(Acquired Oct 2017)

(Acquired Apr 2018)

(Acquired May 2018)

Q2 & Q3 2018Q1 2018Q4 2017


Acquisitions & Key Milestones to Date

Feb 2019

Began trading on the Frankfurt Stock

Exchange as 0ZB

May 2019

Began trading on the OTCQX as

CTSDF

July 2019

Expanded geographical

coverage

Twelve acquisitions completed since October 2017

(Acquired Oct 2019)

(Acquired Oct 2019)

Oct 2019

Converge transitioned Essextec from a

strategic partner to a fully owned subsidiary

of Converge

Q4 2019

Converge announced organizational changes

in preparation for Phase III

Aug 2019

Converge announced as Red Hat Premier &

Apex Partner

10

(Acquired Jan 2019)

(Acquired July 2019)

Q4 2019

(Acquired Nov 2019)

Q4 2019

Strengthened portfolio of Hybrid

IT solutions and capabilities

Q1 2019

Q1 2020

Expanded Canadian geographical

coverage

(Acquired Feb 2020)

Q1 2020Q2 & Q3 2019


Phased Approach To Growth

Phase 1 Phase 2

Phase 3

11

o Built national footprint across the U.S. and Canada through nine acquisitions since Oct. 2017

o Developed national managed services and other recurring revenue offerings

o Further enhance scale with larger acquisitions across North America

o Continued cross-sell opportunities within existing customer base

o Fully integrate back office ERP and focus on additional cost take-out opportunities

(in C$)Phase 1

Broad Geographical

Coverage2018

Phase 3

Cost Synergy

Realization

2020 / 2021

~$545M

Pro Forma Run-Rate Revenue

~$75M*

Annualized Recurring Revenue

$2.0B+


$240M+*


~$23M

Pro Forma Run-Rate Adj. EBITDA

Actual Results

$100 – 200M


Targeted Pro Forma Results*

o Continue M&A strategy to expand coverage into the 30+ largest U.S. cities

o Strengthen national managed services and other recurring revenue offerings across acquired businesses

Phase 2

Enabling Hybrid IT

& Cross-Sell

2019 / 2020

~$1.0B


~$140M*


~$50M


Targeted Pro Forma Results*

= current phase

Note: *Annualized Gross Recurring Revenue


Addressing Market Opportunities

12

1. CMA Market Report.

(1)

Highly Fragmented Market with Few Scaled Providers Large Market Opportunity

$3.7T

Global Market

$1.2T

U.S. Market

$650B

Mid Market +

Enterprise

$400B

SMB$150B

Other

Converge Focus

Converge’s unique consolidation strategy provides customers with the resources and technical capabilities of a scaled platform, while

maintaining the brand, reputation, and dedicated resources of a regional provider

~80K

~50%

< 5%

IT Solutions providers covering

a wide range of capabilities,

geographies, and end markets

Market share held by smaller

regional and local providers

Market share of the largest

market participant

11


Converge Cross-Selling Opportunities

13

82

Technical Resources

49

SalesReps

59

Other

Technical and Cloud Teams are Virtual and Overlay All Entities~266

Technical Resources

~194

Salespeople

Northeast Region Southeast Region Central Region West Region Canada Region

48

Technical Resources

54

SalesReps

70

Other

75

Technical Resources

32

Sales Reps

59

Other

30

Technical Resources

28

Sales Reps

49

Other

31

Technical Resources

31

Sales Reps

52

Other

Note: Approx. personnel counts as of May 2020.


2019 Customer & Partner Events

Ansible Workshops

• Boston – 28 clients

• Atlanta – 45 clients

• Indianapolis – 35 clients

• Fort Lauderdale – 50 clients

• Costa Mesa – 65 clients

• Raleigh – 34 clients

• Indianapolis

• Costa Mesa

• Portland

• San Francisco

Cisco WorkshopsSecurity Workshops

• New York City

• Portland

• Boston

Software Enablement

Roadshows

• Raleigh, Atlanta, and Tampa

• Denver, Costa Mesa, Portland, and San Francisco

• Indianapolis and Minnesota

Converge hosts events across geographies to grow its brand recognition and showcase its capabilities to clients & vendors

14


Addressing Market Demand

15

Source: IDC Report

0% 20% 40% 60% 80% 100%

Data Center Automation

Legacy Systems Modernization

DR/Business Continuity

Systems/Data Integration

Digital Transformation

Data Analytics/BI

Cloud Infrastructure

Cloud Applications

Net Percentage Increase in Spending

Converge full suite of solutions & practice areas address IT spending priorities

Top 3 Tech Initiative Spending Priorities

Digital Transformation – 54%

Cybersecurity – 49%

Cloud First/Cloud Migration – 40%


Growth in Cloud Computing

Cloud Platform Annual Growth Q4 2019

(US$ billion)

Q4 2019 Market Share

Q4 2018 (US$ billion)

Q4 2018 Market Share

33.2% 9.8 32.4% 7.3 33.4%

62.3% 5.3 17.6% 3.3 14.9%

67.6% 1.8 6.0% 1.1 4.9%

71.1% 1.6 5.4% 1.0 4.4%

24.4% 11.6 38.5% 9.3 42.4%

16

1. Worldwide cloud infrastructure spending and annual growth, Q4 2019. Source: Canalys Cloud Channels Analysis, January 2019.2. IBM Cloud included in Others

Worldwide Cloud Expenditure & Growth

Annual Growth – 37.2%

Q4 2019 (US$ Billion) – 30.2

Q4 2018 (US$ Billion) – 22.0


Hybrid IT – Organizations’ Cloud Journey

Single Provider Single Provider MulticloudData Center +

Multicloud

Net-new Workloads

Low-risk Workloads

Complex Workloads

Any Workload

Basic Cloud SkillsExpanded Cloud

SkillsAdvanced Cloud

SkillsIT Becomes the

Broker

• Organizations will continue to advance cloud-first strategies to reduce TCO and improve service levels

• Traditional cloud market segments will blur

• Multicloud will become the de facto standard

• Architects will make Hybrid IT a reality

Initial Cloud Deployment

Cloud-First Deployment

Multicloud is the Norm

Hybrid IT Becomes

Mainstream

"Many organizations have now passed thedefinitional stage of cloud computing and are testingcloud architectures inside and outside the enterpriseand over time, the cloud will simply become one ofthe ways that we 'do' computing, and workloadswill move around in hybrid internal/external ITenvironments"

– Chris Howard, Chief of Research at Gartner.

17


Advanced Cloud Offerings and Partnerships

18


M&A Strategy Overview

191. Revenue $ in USD.

12


Integration and Operational Model

Focused on Synergies and Efficiencies

Increase Sales• Run campaigns with Tier-1 vendors repeating industry specific sales across

geographies • Cross-sell best of breed solutions to other Converge customers• Leverage relationships to increase enterprise sales• Consolidate recurring revenue offerings across acquisitions and service a broader

range of customers • Introduce Converge TrustBuilder Platform into large North American customer

footprintExpand EBITDA margins by approx. 1.5%* due to Vendor Rebates• Top Vendor certifications leads to better pricing, rebates and market development

fundsTarget to remove costs equal to approx. 2%* of Revenue • 1% derived from back office costs and 1% from front office duplications

Revenue Synergies

Working Capital Efficiency

Improve working capital by extending terms with vendors• Extending average payable terms by 10-15 days generates approximately $2.7M-

$4.1M of liquidity for every $100M of product spend*

Converge focuses on acquisitions and organic growth

through cross-selling.

20


YoY Growth12 months

ended

(C$ thousands) 31-Mar-19 31-Mar-20 31-Dec-19

Revenues 170,601 241,525 42% 687,796

Cost of Sales 133,394 186,690 40% 526,211

Gross Profit 37,207 54,835 47% 161,585

Selling, general,

and admin

expenses

29,646 46,741 58% 136,949

Adjusted

EBITDA*8,453 11,044 31% 31,622

3 months ended

Financial Summary | Q1’2020 Results

Income Statement

*Income (loss) before finance expenses, income taxes, depreciation and amortization, change in contingent consideration, transaction costs, initial public offering costs

Balance Sheet

21

As at

(C$ thousands) 31-Mar-20 31-Dec-19

Cash 34,894 28,438

Trade & other receivables 251,585 220,138

Inventories 45,393 23,376

Other current assets 13,483 15,232

Total Current Assets 345,355 287,184

Long-term assets 227,851 201,700

Total Assets 573,206 488,884

Trade & other payables 314,964 248,218

Borrowings 156,750 156,696

Other financial liabilities 73,934 68,845

Debentures 3,807 3,629

Convertible Debenture 5,155 5,114

Other liabilities 21,968 16,259

Total Liabilities 576,578 498,761

Shareholder’s Equity (3,372) (9,877)

Converge Leadership Team

• Co-Founder of Converge TP

• Co-Founder of Pivot, Triax Capital, Skylon Capital

• Director of Flow Capital Corp., and Quisitive Technology Solutions Inc.

• Financial Industry entrepreneur and investor

Gordon McMillan | Board Chair

• Former Chief Information Officer of Pivot

• 25+ years of experience in both the software and infrastructure sides of the technology sector, as well as sales and warehouse operations

• Leads integration initiatives from acquisitions to operations

Cory Reid | COO

• Former Chief Data Officer of Pivot, and Former CEO of IntelligentWorks– a custom software development company based in Ottawa

• President of Canadian Region

• Leads Blockchain initiatives

Don Cuthbertson | CTO

• VP of Human Resources and Director of HR for Corus360

• Leads HR practices emphasizing teamwork, communication and growth

• Heads multiple leadership groups including Emerge 360 Leadership Development Program, GRIT (Girls Rule IT), and Toastmasters

Rhonda Hanes | VP of HR

• Former COO of Pivot

• Ran Prosys Info Systems ($700M+ ITSP) and performed diligence & integration for Pivot acquisitions

• Early Java Pioneer with extensive experience in software industry

Shaun Maine | CEO

• Former VP for Professional Services of Pivot

• 25+ years of experience in technology services delivery and technical presales alignment, as well as leading vendor alliance programs and strategy

• Specializes in services alignment and growth with merger and acquisitions

Tommy Whatley | EVP Services | Vendor Alliance

• Former CFO at Espial Group –acquired by a leading Canadian based software company

• Over 20 years of experience in finance with strong knowledge of capital markets, IR, and operations

• Oversees Strategic Financial Planning and Analysis, Financial Reporting, and Internal Controls Management

Carl Smith | CFO

• SVP of Enterprise Sales and SVP of Sales for Datatrend

• Over 20 years experience in Global Enterprise Sales and Leadership

• Responsible for Enterprise Sales & Strategy, along with Converge Sales Strategy with Cisco

Cari Hash | SVP Enterprise Sales

• Experienced leader with 20+ years of sales and management services

• Expert in building new ecosystem business models and driving growth in existing partnerships

• Targeted leadership and development experiences result in delivering organizational design and transformation

Vanita Patel | VP of IBM Sales

• President of Lighthouse Computer Services & Eastern Region

• Extensive experience in IT Management across hardware, services and software

• Oversees business development, client services, strategic partnerships, and go to market strategy

Greg Berard | President


John FloresExecutive Vice President

[email protected]

Shaun MaineChief Executive Officer

[email protected]

Carl SmithChief Financial Officer

[email protected]

THANK YOU

Documents

Converge Technology Solutions Corp.€¦ · Converge’sactual financial position and results of operations may differ materially from management’scurrent expectations and, as a